SANTRAM AND COMPANY Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) This appeal by special leave arises from the order of the single Judge of the Rajasthan High Court made in Civil Revision Petition No. 293/90, dated August 7, 1990.

(2.) The admitted position is that the appellant had entered into a contract with the respondent-State for execution of the works of widening of Gagar Diversion Bridge at Bikaner in Sri Ganganagar Section. Pursuant to a dispute which arose between the parties, in terms of the contract, the matter by mutual agreement, was referred to the arbitrator by name Sri K. L. Sethia. Pending arbitration, the respondent sought to adjust the amounts due to the appellant in another contract. Thereon the appellant filed an application in the district Court under Order XXXIX, Rule 1, Code of Civil Procedure, 1908 read with Section 41(b) of the Arbitration Act and the Second Schedule to the Arbitration Act, 1940 for ad interim injunction restraining the respondent from adjusting the same. The District Judge by his order held that such an application is not maintainable without the intervention of the Court; therefore, Section 41(b) and the Second Schedule have no application. The same came to be upheld by the learned Chief Justice in the impugned order. Thus this appeal by special leave.

(3.) Shri A. B. Rohtagi, learned senior counsel for the appellant, contends that for entertaining an application under Section 41(b) read with the Second Schedule, it is not a condition that the arbitration proceedings should be pending through the intervention of the Court. Independently thereof, when arbitration proceedings were pending between the parties in respect of the claim or counter-claim and when the respondent sought to adjust the same with the amounts due from other contracts, the Court would, in the circumstances, intervene and restrain the respondents from adjusting the same as a counter-claim. Otherwise, the arbitration proceedings would be nullified. He placed strong reliance on the judgment of a two Judge Bench of this Court in Union of India v. Raman Iron Foundry, (1974) 3 SCR 556 . The question is no longer res integra. A Bench of three judges of this Court in Kamaluddin Ansari and Co. v. Union of India, (1983) 3 SCR 607 has considered the scope of Section 41(b) and the Second Schedule and had held thus: